Tuesday, August 5, 2014

Spirit Airlines (SAVE) Q2 2014 Earnings

Spirit Airlines (SAVE) reported earnings, beating on earnings by reporting $.91 versus $.89 from consensus and beating on revenue by reporting $499.3 million versus estimates of $499.3 million. Driving revenue was the passenger ticket growth and non-ticket growth increasing by 25.5% and 18.4% year over year, respectively.

Non-ticket revenue saw major growth due to passengers choosing to purchase seat assignments at kiosks and a closer management of seat inventory being distributed. Spirit saw expansion into Kansas City last quarter, with more expansion being made to connect Houston to San Diego, Fort Lauderdale, New Orleans, and Atlanta. SAVE ended the quarter with $567 in unrestricted cash, after adding one new A320 aircraft to their fleet, with seven additional aircrafts scheduled to arrive by the year end. SAVE has been in talk to secure debt financing for four of their 2014 deliveries and the first eleven deliveries of 2015, with a preliminary agreement for this financing in place. For the rest of 2014, Spirit estimates that their price per gallon of fuel should be around $3.09. Capacity for the full year is expected to be up 17.8%. Year long CASM guidance has been increased by 50 basis points, which should provide a better cost structure and provide confidence in reliability of Spirit.

Spirit’s stock price has remained relatively flat since earnings reported, with the stock slightly down in the hours after. Our investment thesis remains strongly intact, as Spirit is still the leader in low cost airfare. With the free cash that Spirit has, expanding its fleet should not be a problem for them and expansion can be done. The valuation on Spirit will need to be reevaluated, as we are sitting near our price target, and we can establish our position from there.


IART Q2 Earnings

Integra LifeSciences Holdings Corporation (IART) reported second quarter earnings today, August 5, 2014.  Last closing at $50.01, Integra’s price went up 3.93% today after releasing their positive results.  Integra beat our estimates across all lines.  Total revenues increased 12.6% YOY, totaling at $25.8 MM.  Integra’s revenue drivers included the neurosurgery business which represented 40% of total revenue, and DuraSeal.  GAAP diluted EPS tripled compared to the same quarter last year and is $0.15 for 2Q2014. 

Soon after Integra’s optimistic conference call, they announced positive results of the clinical trials for INTEGRA Dermal Regeneration Template for the Treatment of Diabetic Foot Ulcers.  Integra expects to submit their data from these trials to the FDA by the end of 2014 and to commercialize the product in 2016.

Going forward, Integra estimates FY2014 revenues to be between $920 and $940M, and FY EPS to be between $1.06 and $1.24.  Our investment thesis for Integra remains bright.  Since our buy-in price of $40.41, UASBIG has realized an upside of over 23.75%. 

Monday, August 4, 2014

ROSE Q2 Earnings

Rosetta Resources announced earnings for the second quarter of 2014 today after the close. the company reported adjusted diluted earnings of $0.82 which is down $0.02 from last year and considerably below our estimates of $0.93. Revenue was reported at $220.9MM, down 7% compared to $236.5MM last year, also below our estimates of $267MM. I have to say, disregarding the numbers, the company did have a strong record performance this quarter. They were hit hard by unrealized derivatives during Q2, ( I will find more information on an explanation for this during tomorrows conference call) if you exclude this unrealized derivative, revenues came in at a record $264.6MM compared to $193.8MM last year, which is much more inline with our initial estimates. Some highlights in the quarter include the six horizontal wells completed in the Delaware Basin, well costs in the Eagle Ford region were reduced by 10%, increased total daily oil production by 56& to 19.0 MBbls/d over last year and 18% sequentially. I think the most important bit of information from the release is the fact that they saw a 14% sequential growth in Permian daily oil production. Due to the strong performance this quarter, the company updated its guidance for FY2014 production by 3 MBoe/d to a range of 63-66 MBoe/d, representing a 30% production growth year-over-year. I will post a follow up blog tomorrow with more information on the unrealized derivatives that hurt both the company's top and bottom lines.

Sunday, August 3, 2014

Halliburton



Last week HAL experienced a decline of 6% largely as a result of industry wide discomfort with current geopolitical risks. Industry competitors Schlumberger and Baker Hughes share price declined 3.5% and 7%, respectively over the same period for comparison. After Q2 earnings were released multiple Wall Street analysts raised their price targets for HAL significantly (>10%) above our own. HAL has experiencing increased volatility more recently but with the Middle East / Asia segment contributing less than 20% of annual revenues and with expectations of better numbers from Latin America (compared to 2014 Q2) in Q3 along with continued growth in North America we also agree that an increased price target is warranted.  Our new price target for HAL has been raised to $79, on the mid-lower end of analyst estimates, along with a new stop loss of $63. We have already experienced strong returns YTD and expect HAL to continue to remain a strong position in the portfolio.

Friday, August 1, 2014

Invesco Q2 Earnings



The second quarterly report was released by Invesco on 7/31/14. The 2014 Q2 earnings beat our last estimate. With the most updated information, our model generated a target price of 43.65, 15.43% higher than the previously implied value. The adjusted operating income came in as $377 million, indicating an increase of 21.4% compared with the same quarter last year. The company attributes most of its business growth to the market gains in the U.S and continental Europe.

The AUM rose significantly, from $787 billion in the prior quarter to $802 billion, indicating an aggressive upward scaling. Consequently, the operating income increased to $377 billion, or 65 cents per share, from $363 million, or 60 cents, a quarter earlier. The company, during the last quarter, bought back common shares totaled $50 million, substantially sending out the signals that shares were undervalued. The market reacted to this earnings release only by bringing up the share price by 5 basis point.


Regardless of the client withdrawals issue in U.K, the growth potential of this company remains optimistic to industrial practitioners as the equity market is expected to follow an upward trend under momentum effects. According to a broad global stock benchmark, the world’s total market capitalization increased by more than 4% in the last quarter. At the meantime, Invesco has her natural competitive advantages, such as multiple distribution channels and decent asset allocation. As a result, Invesco successfully took in about $6.2 billion long-term deposits exclusive of the U.K.  This achievement largely improved the confidence of creditors as well, given the fact that senior unsecured debt rise for a subsidiary of Invesco was upgraded from A- to A. 

Wednesday, July 30, 2014

NOV (follow up)

I want to follow up on my blog post from yesterday, I want to talk about why the stock reacted the way it did to seemingly strong results. As soon as the company released earnings the stock jumped about 2% in early morning trading, however, after the conference call, it quickly started to decline, ending at down 1.52% for the day. I believe the reason for this is managements commentary on limited orders for new floaters into the third quarter and a couple quarters beyond that this decrease in demand is due to lower dayrates along with contracted capacity already coming to the market. However, they feel this is a challenge that will rollover into the first half of 2015 when they start seeing strong demand pick up. With this being said, I believe we should look passed the softening in demand for new floaters, and look at what will continue to support their strong revenue and earnings growth. Their impressive backlog with about 180 offshore newbuilds currently underway, strong demand for equipment in order to maintain and test offshore rigs over the next five years, their is growing demand for general equipment used to upgrade offshore rigs for float capacity, and lastly, their growing backlog for land rigs and land equipment. The reasons aforementioned will surely offset the softening in orders for new floaters.I intend to see some mixed results within each business segment of the company, but all in all I am still optomistic about this company and feel there is still plenty of room for capturing more upside.

Tuesday, July 29, 2014

NOV Q2 earnings

National Oilwell Varco reported Q2 earnings today. NOV reported non-GAAP EPS were $1.61, beating our estimate of $1.57 and streets of $1.44. Net sales came in at $5.26B, up 12% from the year ago period but coming up short from ours and the streets estimates of $5.5B. The increase in revenue is due to increased demand in North America. I updated the model as well as ran a new regression including the second quarter results. Due to what i feel was a strong quarter, I am comfortable with raising my FY2014 EPS to $5.92, which is $0.02 below street consensus. As of now I have a price target of $89 which represents an upside of about 7%.